Toyota Motor Corporation TM recently vowed to remain profitable despite the coronavirus pandemic.
Toyota has halted several domestic factories from April through June to curb the spread of the virus. It also warned its investors that profits will likely tank 80% to a nine-year low in fiscal 2021 and targets an operating profit of 500 billion yen ($4.65 billion) for the fiscal year. Further, the automaker has not changed its plans to manufacture 3 million cars annually in the country.
In addition, Toyota is easing auto-loan payment deadlines and offering used rental vehicles instead of new ones to help cash-strapped customers in the face of the rising global market uncertainty. The firm has also refrained from cutting any jobs, and aims to reduce costs through scrutiny and improvement of every aspect of its business.
The coronavirus outbreak has rattled Japan’s auto market, with depressed demand and restricted business at dealerships. With the COVID-19-induced shelter-in-place orders since April, factories and stores were temporarily shuttered and demand shrunk. Apart from Toyota, other Japan-based auto biggies, including Nissan NSANY, Honda HMC, Suzuki, Mazda and Mitsubishi, resorted to significant production cuts due to the coronavirus mayhem. In order to continue investing in development, Toyota and other automakers have also sought loans and credit lines from banks. Although Japan has lifted its state of emergency, the outbreak has damaged a number of smaller players in the auto industry, with one Toyota supplier filing for bankruptcy last week.
Furthermore, Toyota has rolled out policies which include keeping the staff at least 6 feet apart, sanitizing work areas and tracking employee temperature regularly to keep workers safe. The companies have also installed plastic screens or partitions along assembly lines to isolate staff, redesigned workspaces for lesser encounters and made wearing face masks or shields compulsory.
Meanwhile, Toyota has signed a joint-venture (JV) agreement forming United Fuel Cell System R&D (Beijing) Co., Ltd. (FCRD) with five Chinese OEMs, including Beijing SinoHytec, China FAW Corporation Limited, Dongfeng Motor Corporation, Guangzhou Automobile Group, and Beijing Automotive Group. The JV is aimed at supplying fuel-cell systems for commercial vehicles manufactured by the Japanese automaker in China and strengthen its ties with the Chinese companies.
Toyota plans to introduce fuel-cell-enabled SUVs, and pick-up and commercial trucks by 2025. Additionally, the automaker is working on hydrogen fuel stations in collaboration with various partners. It aims to generate half of its global sales from electric vehicles by 2025.
Zacks Rank & Key Pick
Toyota currently carries a Zacks Rank #5 (Strong Sell). Shares of the company have depreciated 11.5%, year to date, compared with the industry’s decline of 9.3%.
A better-ranked stock in the same sector is Tesla TSLA, sporting a Zacks Rank of 1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Tesla have soared 132.6%, year to date, compared with the industry’s rise of 44.3%.
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